war, its customs receipts usually fall very low just at the time when it most needs increased revenue. Then internal taxes are resorted to. The United States bankrupted itself in the War of 1812 and suffered all the calamities of the greenbacks in the Civil War for lack of an established internal revenue system. On such extraordinary occasions few taxes could be used to better advantage than an income tax. But the emergency value of this tax lends no support to the frequent protest that it should be retained for emergencies only, or even chiefly. If it is more equitable than a tariff or other taxes, that very equitableness is the strongest argument for its being the source of the ordinary annual revenues. Justice as a rule and injustice occasionally is better than the

reverse.

The removal of the chief appointments from the civil service gives the Commissioner of Internal Revenue a freer hand and a better opportunity to secure an efficient, sympathetic, and responsive staff of administrators, if he is equal to the task and is not hindered by the demands of congressional patronage. At the same time, it opens wide the door to possible abuse. The law's limitation of compensation to be paid indicates that Congress has not a real appreciation of the administrative requirements of such a tax. Even with a large corps of the best men available, it would be a very great undertaking to establish the new tax throughout the United States so as to reach a maximum of efficiency.

It is unfortunate that we have no local officials corresponding to the land tax commissioners of England with whom the collectors of the federal tax can coöperate, as is done there so successfully. However, it is possible that some such coöperation can be devised by a resourceful administration. At least, such assistance might be secured by coöperation with local assessors and others in points of vantage, although this would be only one step in the right direction. It is also unfortunate that we do not have a body of trained collectors similar to the inspectors and surveyors of England, but such a corps could be secured in the course of time if we had the same traditions relative to expert service, tenure of office, and promotions. It is to be hoped that we may develop this in time, also.

In the state of Wisconsin, which has a state income tax with a much lower abatement than the national tax and which has also an excellent administrative system, the work of the federal income tax collectors should be immeasurably more efficient than elsewhere. If Wisconsin's income tax proves to be as successful permanently as it seems to have been so far, doubtless other states will adopt similar systems and the efficiency of the federal tax be thus extended.

In conclusion it may be said that the fundamental principles of the new law are sound and that its details, so far as worked out, are sufficiently correct to insure its success if it is properly administered. Popular opinion is closely enough in harmony with it to overlook much unfriendly criticism and to help assure its success. Though it seems probable that it will not be administered nearly so efficiently as it might be, still it can hardly fail to be very effective as applying to incomes reached at the source. As time goes on it will doubtless be differentiated and extended and will become a great fiscal engine. As in the case of most taxes, efficient administration is the great desideratum. Because of the extraordinarily great powers that have been given the Commissioner of Internal Revenue and the Secretary of the Treasury, it may fairly be said that the responsibility for the success or failure of the new tax is upon their heads.

Cornell University.

ROY G. BLAKEY.

Texas is a cotton state, having a relatively sparse population, a high percentage of tenant farmers (53 per cent), and a negro element which averages over 25 per cent in the majority of the cotton counties. Moreover, Texas is industrially a new and undeveloped state. The presence of much risk is attended by a large measure of speculative spirit. Everywhere there is talk of rising land values, which causes speculative land holding and retards economical farming. The element of risk, too, is increased by the frequency of crop failures on account of drought and frost. Other elements in the general situation are a homestead exemption law which, by making two hundred acres execution proof, often prevents the use of land as security for loans; and a law requiring the taxation of mortgages which operates to increase the borrower's interest rates.

While many ventures fail, those that succeed pay well; and the state is growing at so rapid a rate that much capital has to be attracted from other sections by high interest. As a result, the interest rate on commercial loans averages a little over 8 per cent,` running from an infrequent minimum of 6 per cent up to 12 per cent in some sections. Now, farmers as a rule pay higher interest than the commercial classes, for the latter generally have a standing that is more readily known, maintain larger and more regular balances, possess more liquid assets, and settle more promptly. What, then, are the facts concerning farm credit conditions in Texas?

Bank Credit

On the basis of the material available to the writer,1 it appears that only about 4 per cent of Texas farm owners do not borrow from banks, or, in other words, about 95 per cent do. Nor do these loans come at irregular intervals. The great majorityborrow year after year-are perennials, so to speak. The most

This investigation is based upon reports made by farmers, bankers, and merchants, nearly all in central and eastern Texas. Over one hundred loans were reported to the writer by farmers from 35 counties; twenty bankers wrote from 15 counties; and a half a dozen merchants from as many counties gave information. This mass of data was then checked against the impressions of several well-informed bankers and farmers living in Austin. Internal evidence to the correctness of the data is borne by the fact that the reports of farmers and bankers for the same counties are in substantial agreement. It is important to note that the data are selected to some extent in favor of con

common answer to the question, What per cent of your borrowers ask for accommodation year after year, was 75 per cent; the next most common reply was 90 per cent, or "nearly all"; only one went below 50 per cent. The data show a rather close correspondence between percentage of "perennials" and loans to tenants, for tenant farmers are nearly all repeaters.

The one great purpose of most farm loans in Texas is to help "make the crop." The usual items involved in making a crop are labor (chopping and picking cotton), feed, seed, groceries, and perhaps mules. Nearly all short-time loans are for this purpose, and about 85 per cent of the longer ones. Other purposes for which Texas farmers borrow from banks for short periods are: commercial and trading transactions, holding cotton, accommodations to tenants, and extensions of preceding loans for the purpose of tiding over the farmer after a bad year or till a late crop is gathered. About 15 per cent of long loans are for investment and improvements, involving such items as land purchase, stock, buildings, and machinery.

By comparing a group of the loans over $1,000 with a group of $50 loans, it appears that the majority of the former are for "improvements," with purchase of machinery or land next in order; while most of the latter are for making crop, with labor, feed, and seed as the main items. The latter are also applied not infrequently to the purchase of mules, plows, and to making improvements. One eighth of the small loans were clearly for the purpose of consumption.

Taking into consideration all loans upon which this study is based, the average sum borrowed by Texas farmers from banks is a little over $500. If those loans of unusual size which are made for such purposes as purchasing land and making permanent improvements are deducted, the average loan is about $300. This conclusion is borne out by the estimate of the bankers, who report that loans to farmers usually run from $100 to $300 and rarely exceed $500.

The questionnaire sent to farmers called for the amounts of the largest loan and the smallest loan secured from a bank. The returns show that the average Texas farmer's largest loan is approximately $1,000, and his smallest loan is about $100. Of course, these amounts varied greatly, the largest loans running from $70 to $6,000, and the smallest from $5 to $2,000. Examination of the frequency distribution of the size of the loans shows the most common loan to be $50, and that 45 per cent of the loans do not exceed $100.

The returns from farmers show that the average time for all loans is seven months (the large loans averaging nine months, the smaller ones four months). The bankers in their answers show an average duration for all loans of six months, which is also clearly the mode for their data. If we separate the long-time loans (over six months) from the short-time loans, we find that the average period for long-time loans is nine months, while three months is both average and mode for short-time loans. Probably less than 5 per cent of loans to farmers are for over nine months.*

The great majority of the secured bank loans to farmers are made on chattel mortgage security. Perhaps such security is required in about 90 per cent of those cases in which security is demanded at all. Personal endorsement is next most common, being the only security given in about 10 per cent of the cases. chief item in the chattel mortgage security is mules.

A

Not a few loans are made without security, generally, of course, to substantial land-owning farmers. The writer asked the bankers what proportion of their short-time loans are secured. The answers run all the way from 15 per cent up to 100 per cent. From 75 per cent to 90 per cent seems most common. The state banks show a smaller percentage secured than the nationals.

Real estate security is a knotty point for bankers in farming communities. State banks in Texas are allowed to take a certain

These loans average over $2,000 and run from $450 to $6,000. Farmers generally borrow in the spring (February-April) to pay from the autumn crop.